A reader asked the following question: “I’m in my 80’s. Should I lease my next car or should I finance it like I’ve done before?”
There are advantages to leasing.
- Less hassle. You can turn the vehicle in at the end of the lease period, pay any end-of-lease payments, and walk away.
- Lower initial costs. Usually there is little or no down payment.
- Lower maintenance costs. Many leases last about three years, the same as the typical length of many new-car warranties.
- Lower monthly payments. Lease payments cover the estimated depreciation of the car during the lease period not its full value. Since monthly lease payments are lower than monthly finance payments, you can afford to drive a nicer car.
- Lower sales tax. You are taxed only on the depreciated value during the lease period, not on the total price of the car.
There are also some disadvantages to leasing.
- Lack of flexibility. You can’t add a rear spoiler or repaint the vehicle tomato red. The car must be returned exactly as received.
- Penalties for early lease termination. If you need to opt out of the lease early there is often a large penalty involved. If the lessee dies, the estate is responsible for the lease contract. The estate can break the lease, but this generally involves considerable costs.
- Lack of equity. Unlike a financed car, the lessee has no equity in the vehicle. Once the lease terminates, you must either lease again or buy another vehicle.
- GAP insurance needed. You need to purchase additional auto insurance to cover the difference between what you owe on the lease and what the vehicle is actually worth if destroyed in an accident or is stolen.
- Extra Costs at Lease Termination.
- Most leases limit the number of miles you may drive (typically between 9,000 to 15,000 per year). You pay mileage charges for exceeding these limits.
- Most leases hold you responsible for any wear and tear exceeding what the lessor determines is normal.
I know some lessees who garage their cars near the end of the lease period. They are concerned about exceeding their allotted mileage. Each additional mile costs around $0.20. Rather than pay an extra $500, I know of one lessee who decided not to drive to see his grandchildren.
Speaking of grandchildren and other heirs, if you can afford it, the easiest method for your heirs is to purchase your vehicle outright. This will avoid them having to deal with loan and lease companies. So at 80-years old should you lease or buy? There is no one answer. It depends on your personal situation and other considerations. If you usually drive a car for seven plus years, want greater flexibility and an equity position, buy your next car. On the other hand, if you plan on driving the car for 3 years, want a nicer car for the money, lower payments and easy turnover, leasing is the better option.
So if you think this might be your last car, instead of buying a Chevy why not lease a Cadillac?
